LSI Industries Inc. (NASDAQ:LYTS)
today:
- reported second quarter FY 2016 net sales of $84,687,000 level
with $84,715,000 in the same period of the prior fiscal year;
- reported second quarter FY 2016 net income of $3,782,000, or
$0.15 per share, an increase of 138% as compared to $1,588,000, or
$0.06 per share, for the same period of the prior fiscal year;
- reported first half FY 2016 net sales of $170,612,000, an
increase of 5% as compared to $163,181,000 in the prior fiscal
year;
- reported first half FY 2016 net income of $7,532,000, or $0.30
per share, an increase of 142% as compared to net income of
$3,115,000, or $0.13 per share, for the prior fiscal year;
and
- declared a regular quarterly cash dividend of $0.05 per share
payable February 16, 2016 to shareholders of record February 8,
2016, representing an increase in the indicated annual rate from
$0.16 to $0.20 per share.
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Financial Highlights |
(In thousands, except
per share data; unaudited) |
Three Months End |
Six Months Ended |
|
December 31 |
December 31 |
|
|
2015 |
|
|
2014 |
|
%
Change |
|
2015 |
|
|
2014 |
|
%
Change |
|
|
|
|
|
|
|
|
Net Sales |
$ |
84,687 |
|
$ |
84,715 |
|
|
-- |
|
$ |
170,612 |
|
$ |
163,181 |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
Operating Income
as reported |
$ |
5,380 |
|
$ |
2,224 |
|
|
142 |
% |
$ |
11,143 |
|
$ |
4,758 |
|
|
134 |
% |
|
Severance costs |
|
223 |
|
|
800 |
|
|
(72 |
)% |
|
223 |
|
|
800 |
|
|
(72 |
)% |
|
Loss on sale of assets,
net |
|
-- |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
222 |
|
|
n/m |
|
|
Operating Income as
adjusted (a) |
$ |
5,603 |
|
$ |
3,024 |
|
|
85 |
% |
$ |
11,366 |
|
$ |
5,780 |
|
|
97 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income as
reported |
$ |
3,782 |
|
$ |
1,588 |
|
|
138 |
% |
$ |
7,532 |
|
$ |
3,115 |
|
|
142 |
% |
|
Net Income as
adjusted |
$ |
3,928 |
|
$ |
2,105 |
|
|
87 |
% |
$ |
7,678 |
|
$ |
3,872 |
|
|
98 |
% |
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
(diluted) as reported |
$ |
0.15 |
|
$ |
0.06 |
|
|
150 |
% |
$ |
0.30 |
|
$ |
0.13 |
|
|
131 |
% |
|
Earnings per share |
|
|
|
|
|
|
|
(diluted) as adjusted |
$ |
0.15 |
|
$ |
0.09 |
|
|
67 |
% |
$ |
0.30 |
|
$ |
0.16 |
|
|
88 |
% |
|
|
|
|
|
|
Financial Highlights (continued) |
(In thousands) |
|
|
12/31/15 |
6/30/15 |
|
Working Capital |
$ |
93,695 |
|
$ |
83,967 |
|
|
Total Assets |
$ |
187,534 |
|
$ |
182,379 |
|
|
Long-Term Debt |
$ |
nil |
|
$ |
nil |
|
|
Shareholders’
Equity |
$ |
153,299 |
|
$ |
142,952 |
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|
(a) The
Company incurred net pre-tax severance costs of $223,000 and
$800,000 in the second quarter and first half periods of fiscal
2016 and fiscal 2015, respectively. The Company sold a
manufacturing facility as well as a subsidiary in the first
quarter of fiscal 2015, both of which netted to a pre-tax net loss
of $222,000. Operating income, net income, and earnings per
share (diluted) before severance costs, the sale of assets and
tax effect of the utilization of a long-term capital loss are
Non-GAAP financial measures (see page 4). |
|
Management Comments and Outlook
Dennis W. Wells, Chief Executive Officer and President,
commented, "The second fiscal quarter was bitter-sweet in that we
achieved strong earnings growth, but did not reach our sales goal.
With regard to sales, we fell short due almost entirely to delayed
shipments of both our lighting and graphics products for a
significant petroleum / convenience store program caused by
installation delays by one of their installers. As a result, $5.8
million in sales dollars expected in the second quarter will not
ship until the current quarter. Had these products shipped as
planned, our sales for the second quarter would have been 6.8%
above the same period of the prior fiscal year. That was the
"bitter" part of the second quarter.
“On the "sweet" side, operations continued to improve as a
result of implementing our LSI Business System and lean
manufacturing elements, and LED sales represented 70% of our total
lighting revenues. Gross profit for the second fiscal quarter was
28.3%, an increase of 400 basis points from the same period of last
fiscal year. Operating income increased from $2.2 million to $5.4
million, representing a 380 basis point margin improvement from
2.6% to 6.4%. And, we believe we still have a lot of room for
profit improvement as we move forward.
“Looking at sales growth prospects, we continue to build our
sales force, develop and bring to market exciting new products, and
introduce new technologies to our customers. Our quotation pipeline
is healthy, and the Kroger and Love's projects we mentioned in
previous press releases have begun to ship. We will not be
satisfied until we are growing at a faster rate than our
markets.
“Based on our improved operating results and our optimism
regarding the second half of fiscal 2016 and beyond, the Board of
Directors moved to increase the indicated annual cash dividend rate
from $0.16 per share to $0.20 per share, an increase of
25%.
“As we have moved from turnaround to optimization, LSI is
focused on increasing sales, improving operating efficiencies,
gaining market share, maintaining a strong balance sheet and
increasing cash dividends.
“I look forward to reporting our third quarter results.”
Second Quarter Fiscal 2016 Results
Net sales in the second quarter of fiscal 2016 were $84,687,000,
level with last year’s second quarter net sales of
$84,715,000. Lighting Segment net sales of $59,601,000 were
level with last year’s second quarter net sales, Graphics Segment
net sales increased 3.8% to $21,034,000, and Technology Segment net
sales (excluding significant intersegment net sales) decreased
12.9% to $4,052,000. After consideration of the Technology
Segment’s intersegment sales in support of LED products
manufactured and sold by the Lighting Segment, this segment’s net
sales increased 5.3% in the second quarter of fiscal 2016. In the
second quarters of fiscal 2016 and fiscal 2015 the Company recorded
a pre-tax severance cost expense of $223,000 and $800,000,
respectively. The fiscal 2016 second quarter net income of
$3,782,000, or $0.15 per share, increased 138.2% over the fiscal
2015 second quarter net income of $1,588,000 or $0.06 per share.
Earnings per share represents diluted earnings per share.
First Half Fiscal 2016 Results
Net sales in the first half of fiscal 2016 were $170,612,000, an
increase of 5% as compared to last year’s first half net sales of
$163,181,000. Lighting Segment net sales increased 2.7% to
$118,676,000, Graphics Segment net sales increased 17.9% to
$42,787,000, Technology Segment net sales (excluding significant
intersegment net sales) decreased 19.3% to $9,149,000 and All Other
Category net sales decreased to zero as a result of the sale early
in fiscal 2015 of the only subsidiary reported therein. After
consideration of the Technology Segment’s intersegment sales in
support of LED products manufactured and sold by the Lighting
Segment, this segment’s net sales increased 4.5% in the first half
of fiscal 2016. The Company recorded $223,000 and $800,000 of
pre-tax severance costs in the first half of fiscal 2016 and fiscal
2015, respectively. Also in the first half of fiscal 2015 the
Company recorded a $343,000 pre-tax gain on the sale of a
manufacturing facility in the Graphics Segment, sold a subsidiary
that had been reported in the All Other Category for $1,928,000 and
recorded a pre-tax loss of $565,000 in Corporate Administrative
expenses, and recorded a $101,000 income tax benefit related to the
utilization of a portion of this long-term capital loss, all with
no comparable items in fiscal 2016. The first half fiscal 2016 net
income of $7,532,000, or $0.30 per share, increased 142% from
fiscal 2015 first half net income of $3,115,000, or $0.13 per
share. Earnings per share represents diluted earnings per
share.
Balance Sheet
The balance sheet at December 31, 2015 included current assets
of $125.8 million, current liabilities of $32.1 million and working
capital of $93.7 million, which includes cash of $28.8
million. The current ratio was 3.9 to 1. The Company has
shareholders’ equity of $153.3 million, no long-term debt, and
borrowing capacity on its commercial bank facility as of December
31, 2015 of $30.0 million. With continued strong cash flow, a sound
and conservatively capitalized balance sheet, and $30 million in
credit facilities, LSI Industries believes its financial condition
is sound and capable of supporting the Company’s planned growth,
including acquisitions, if any.
Cash Dividend Actions
The Board of Directors declared a regular quarterly cash
dividend of $0.05 per share in connection with the second quarter
of fiscal 2016 payable February 16, 2016 to shareholders of record
as of February 8, 2016. The indicated annual cash dividend rate is
now $0.20 per share, up from the previous $0.16 per share indicated
annual rate, representing an increase of 25%. The Board of
Directors has adopted a policy regarding dividends which indicates
that dividends will be determined by the Board of Directors in its
discretion based upon its evaluation of earnings, cash flow
requirements, financial condition, debt levels, stock repurchases,
future business developments and opportunities, and other factors
deemed relevant.
Non-GAAP Financial Measures
This press release includes adjustments to GAAP net income and
earnings per share for the three and six month periods ended
December 31, 2015 and December 31, 2014. Adjusted net income and
earnings per share, which exclude the impact of severance costs,
the sale of a manufacturing facility, the sale of a subsidiary, and
the tax benefit of utilization of a portion of the related
long-term capital loss are non-GAAP financial measures. We believe
that these are useful as supplemental measures in assessing the
operating performance of our business. These measures are used by
our management, including our chief operating decision maker, to
evaluate business results. We exclude these non-recurring items
because they are not representative of the ongoing results of
operations of our business. Below is a reconciliation of these
non-GAAP financial measures to the net income and earnings per
share reported for the periods indicated.
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|
(in thousands, except
per share data; unaudited) |
Second
Quarter |
|
|
|
Diluted |
|
Diluted |
|
|
FY
2016 |
EPS
|
FY 2015
|
EPS |
|
Reconciliation of net
income to adjusted net income: |
|
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|
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|
|
|
|
|
|
|
Net income and earnings per share
as reported |
$ |
3,782 |
|
$ |
0.15 |
|
$ |
1,588 |
|
$ |
0.06 |
|
|
|
|
|
|
|
|
Adjustment for net severance costs,
inclusive of the income tax effect |
|
146 |
|
|
0.01 |
|
|
517 |
|
|
0.02 |
|
|
|
|
|
|
|
|
Adjusted net income and earnings
per share |
$ |
3,928 |
|
$ |
0.15 |
|
$ |
2,105 |
|
$ |
0.09 |
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(in thousands, except
per share data; unaudited) |
Six Month
Period |
|
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|
Diluted |
|
Diluted |
|
|
FY
2016 |
EPS
|
FY
2015 |
EPS |
|
Reconciliation of net
income to adjusted net income |
|
|
|
|
|
|
|
|
|
|
|
Net income and earnings per share
as reported |
$ |
7,532 |
|
$ |
0.30 |
|
$ |
3,115 |
|
$ |
0.13 |
|
|
|
|
|
|
|
|
Adjustment for severance costs,
inclusive of the income tax effect |
|
146 |
|
|
0.01 |
|
|
517 |
|
|
0.02 |
|
|
|
|
|
|
|
|
Adjustment for the gain on the sale
of a manufacturing facility, inclusive of the income tax
effect |
|
-- |
|
|
-- |
|
|
(224 |
) |
|
(0.01 |
) |
|
|
|
|
|
|
|
Adjustment for the loss on sale of
a subsidiary |
|
-- |
|
|
-- |
|
|
565 |
|
|
0.02 |
|
|
|
|
|
|
|
|
Income tax effect of utilization of
a long-term capital loss |
|
-- |
|
|
-- |
|
|
(101 |
) |
|
-- |
|
|
|
|
|
|
|
|
|
|
Adjusted net income and earnings
per share |
$ |
7,678 |
|
$ |
0.30 |
|
$ |
3,872 |
|
$ |
0.16 |
|
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"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995
This document contains certain forward-looking statements that
are subject to numerous assumptions, risks or uncertainties. The
Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. Forward-looking statements
may be identified by words such as “estimates,” “anticipates,”
“projects,” “plans,” “expects,” “intends,” “believes,” “seeks,”
“may,” “will,” “should” or the negative versions of those words and
similar expressions, and by the context in which they are used.
Such statements, whether expressed or implied, are based upon
current expectations of the Company and speak only as of the date
made. Actual results could differ materially from those contained
in or implied by such forward-looking statements as a result of a
variety of risks and uncertainties over which the Company may have
no control. These risks and uncertainties include, but are not
limited to, the impact of competitive products and services,
product demand and market acceptance risks, potential costs
associated with litigation and regulatory compliance, reliance on
key customers, financial difficulties experienced by customers, the
cyclical and seasonal nature of our business, the adequacy of
reserves and allowances for doubtful accounts, fluctuations in
operating results or costs whether as a result of uncertainties
inherent in tax and accounting matters or otherwise, unexpected
difficulties in integrating acquired businesses, the ability to
retain key employees of acquired businesses, unfavorable economic
and market conditions, the results of asset impairment assessments,
the Company’s ability to maintain an effective system of internal
control over financial reporting, our ability to remediate any
material weaknesses in our internal control over financial
reporting and any other risk factors that are identified herein.
You are cautioned to not place undue reliance on these
forward-looking statements. In addition to the factors described in
this paragraph, the risk factors identified in our Form 10-K and
other filings the Company may make with the SEC constitute risks
and uncertainties that may affect the financial performance of the
Company and are incorporated herein by reference. The Company does
not undertake and hereby disclaims any duty to update any
forward-looking statements to reflect subsequent events or
circumstances.
About the Company
We are a customer-centric company that positions itself as a
value-added, trusted partner in developing superior image solutions
through our world-class lighting, graphics, and technology
capabilities. Our core strategy of "Lighting + Graphics +
Technology = Complete Image Solutions" differentiates us from our
competitors.
We are committed to advancing solid-state LED technology to make
affordable, high performance, energy-efficient lighting and custom
graphic products that bring value to our customers. We have a vast
offering of innovative solutions for virtually any lighting or
graphics application. In addition, we provide sophisticated
lighting and energy management control solutions to help customers
manage their energy performance. Further, we provide a full range
of design support, engineering, installation and project management
services to our customers.
We are a vertically integrated U.S.-based manufacturer
concentrating on serving customers in North America and Latin
America. Our major markets include commercial / industrial
lighting, petroleum / convenience store and multi-site retail
(including automobile dealerships, restaurants and national retail
accounts). Headquartered in Cincinnati, Ohio, LSI has facilities in
Ohio, Kansas, Kentucky, New York, North Carolina, Oregon, Rhode
Island and Texas. The Company’s common shares are traded on the
NASDAQ Global Select Market under the symbol LYTS.
For further information, contact either Dennis
Wells, Chief Executive Officer and President, or Ron Stowell, Vice
President, Chief Financial Officer, and Treasurer at (513)
793-3200.
Additional note: Today’s news release,
along with past releases from LSI Industries, is available on the
Company’s internet site at www.lsi-industries.com or by email or
fax, by calling the Investor Relations Department at (513)
793-3200.
Condensed Consolidated Statements of
Operations |
|
|
Three Months Ended |
Six Months Ended |
(in thousands,
except per share data; unaudited) |
December 31 |
December 31 |
|
|
2015 |
|
|
2014 |
|
|
2015 |
|
|
2014 |
|
|
|
|
|
|
Net sales |
$ |
84,687 |
|
$ |
84,715 |
|
$ |
170,612 |
|
$ |
163,181 |
|
|
|
|
|
|
Cost of products and
services sold |
|
60,761 |
|
|
64,160 |
|
|
123,337 |
|
|
124,018 |
|
|
|
|
|
|
Gross profit |
|
23,926 |
|
|
20,555 |
|
|
47,275 |
|
|
39,163 |
|
|
|
|
|
|
Selling and
administrative expenses |
|
18,546 |
|
|
18,331 |
|
|
36,132 |
|
|
34,405 |
|
|
|
|
|
|
Operating income |
|
5,380 |
|
|
2,224 |
|
|
11,143 |
|
|
4,758 |
|
|
|
|
|
|
|
|
|
|
|
Interest (income)
expense, net |
|
(8 |
) |
|
6 |
|
|
(8 |
) |
|
14 |
|
|
|
|
|
|
Income before income taxes |
|
5,388 |
|
|
2,218 |
|
|
11,151 |
|
|
4,744 |
|
|
|
|
|
|
Income tax expense |
|
1,606 |
|
|
630 |
|
|
3,619 |
|
|
1,629 |
|
|
|
|
|
|
Net income |
$ |
3,782 |
|
$ |
1,588 |
|
$ |
7,532 |
|
$ |
3,115 |
|
|
Income per common
share |
|
|
|
|
Basic |
$ |
0.15 |
|
$ |
0.06 |
|
$ |
0.30 |
|
$ |
0.13 |
|
Diluted |
$ |
0.15 |
|
$ |
0.06 |
|
$ |
0.30 |
|
$ |
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
24,911 |
|
|
24,449 |
|
|
24,838 |
|
|
24,442 |
|
Diluted |
|
25,624 |
|
|
24,507 |
|
|
25,405 |
|
|
24,506 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets |
|
|
(in thousands,
unaudited) |
December 31, |
June 30, |
|
|
|
2015 |
|
|
2015 |
|
|
Current Assets |
$ |
125,792 |
|
$ |
120,814 |
|
|
Property, Plant and Equipment,
net |
|
43,716 |
|
|
43,188 |
|
|
Other Assets |
|
18,026 |
|
|
18,377 |
|
|
|
$ |
187,534 |
|
$ |
182,379 |
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
$ |
32,136 |
|
$ |
36,847 |
|
|
Long-Term Debt |
|
-- |
|
|
-- |
|
|
Other Long-Term Liabilities |
|
2,099 |
|
|
2,580 |
|
|
Shareholders’ Equity |
|
153,299 |
|
|
142,952 |
|
|
|
$ |
187,534 |
|
$ |
182,379 |
|
|
CONTACT: DENNIS WELLS or
RON STOWELL
(513) 793-3200
LSI Industries (NASDAQ:LYTS)
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